Climate Matters: Missouri insurers face mounting losses as natural disasters surge

More natural disasters are impacting Missouri than before, and insurers are struggling to keep up with the rising risks.

Last year, Missouri experienced five federal natural disaster declarations, more than any other state. The Show-Me state has seen three times as many billion-dollar disasters in the past five years compared to its long-term average.

More disasters lead to more insurance claims for damages.

"The primary driver of what we all pay for our auto or home insurance is the cost of claims and how many claims there are," says Bob Passmore, the Department Vice President of Personal Lines for the American Property Casualty Insurance Association.

Increasingly costly claims are burdening the insurance industry. Missouri insurers paid out $1.23 for every dollar collected in premiums over the past two years, resulting in an underwriting loss of about 23% annually.

However, the companies continue to serve Missouri competitively. "There's still a competitive homeowners market in Missouri, and they're not facing an availability crisis as we've seen in some other states," Bob adds.

Climate change isn't the only challenge for insurers; inflation, rising labor costs, and more expensive building materials are also driving up prices.

"The general inflation trends are stabilizing, but the cost of building materials and labor needed to repair homes remains very high," Bob states. "In the last five years, construction labor has increased by 36% and building materials are up over 42%."

While we may not be able to control the weather or large-scale economic conditions, homeowners can take steps to save money on insurance. Reducing risk is key.

Many insurers offer discounts for using better building materials that can lessen disaster damage. Bob suggests doing this during home renovations, such as replacing roofing or windows. "Often, you can get a discount on things like that or anything that reduces the risk of damage to your home if the event occurs."

It's important to remember that many homeowners' insurance policies do not cover flood damage. The take-up rate for flood insurance through the National Flood Insurance Program, the main source of flood coverage, is below 1% in Missouri, so check your coverage before disaster strikes.